Archives

Sri Lanka has today within its grasp, a unique opportunity to achieve both peace and prosperity. It also faces many challenges as it seeks to reach this elusive goal.

At home, the focus is on building a path to peace and political stability while simultaneously implementing much needed structural reform. Overseas, the threat of global terrorism and the faltering world economy engages the minds of leaders, General Manager, National Development Bank, Nihal Welikala said at the Business Today Top Ten, awards ceremony recently.

"In Sri Lanka, however, there is one important issue, which has not received the prominence it deserves, and that is the role of capital, the fuel that powers the engine of growth.

That new capital is needed to drive increased growth, is beyond dispute.

The tide of overseas aid will ebb and flow, but for sustained development we must aim for self-reliance on capital.

However, capital investment, as well as national savings, have been falling in this country in recent years.

The quantum of capital needed for each percentage increase in GDP growth, depends on the efficiency of its usage. Unfortunately, capital productivity in Sri Lanka is far lower than our Asian competitors including India.

China for example, uses capital 40% more productively than we do, and therefore needs fewer funds to produce the same amount of growth. If Sri Lanka is to increase GDP growth to say 8% p a, it is a stark fact that assuming unchanged productivity, new investment of well over $1 billion will have to be infused into the economy every year to drive this growth. Without this, such growth is a mere vision, an empty dream," he said.

There are many changes that we need to make as a nation, if we are to attract capital on this scale and use it more efficiently.

Fundamental, complex and difficult changes in policies, attitudes and patterns of behaviour are necessary, if we are to compete with every other country for that scarcest of resources, capital.

In particular, the banking industry will be called upon to play an important role in this endeavour. If it is to respond to this call, it must be prepared to deal with new challenges. Banks need increased capital now to meet the requirements of regulators who require higher amounts to capital, to support the risks that banks take. New capital will need to come from either retained profits or from new equity infusion, both of which will be based ultimately on profits and shareholder expectations of profits. However, profits are likely to come under increasing pressure.

Customer expectations are increasing, both in terms of service and price, at a time when banks costs, including the cost of bad debts, are also rising.

There is an increasing need for strong, highly capitalised and therefore highly profitable banks, which possess the economies of scale to keep costs down, and the skills to evaluate, manage and price, the plethora of risks that banks face today.

There is much work to do. The NDB Group looks forward with optimism to meet these challenges and to help Sri Lanka in its march to growth and prosperity, he said.

News | Business | Features | Editorial | Security
Politics | World | Letters | Sports | Obituaries |

Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.
Comments and suggestions to :Web Manager